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Council moves closer to theater deal, but concerns remain
by Jeff Horwich, Minnesota Public Radio
April 6, 2005

The Orpheum is one of three historic Hennepin Avenue theaters owned by Minneapolis. The city is looking to get out of the theater management business, and is considering a deal with Clear Channel and a local nonprofit group. (MPR File Photo/Jeff Horwich)

The Minneapolis City Council is one step away from handing off the city's three historic theaters: The State, the Pantages, and the Orpheum. On Tuesday, two committees reviewed a deal negotiated between city staff and a three-part team dominated by entertainment conglomerate Clear Channel. Many council members say the deal is a solid financial and cultural proposal. Critics fear Minneapolis is about to turn control of community assets over to a giant, out-of-state company.

Minneapolis, Minn. —
When the Minneapolis Community Development Committee and Ways and Means Committee met jointly to consider the deal, much of the discussion turned on the difference between ownership -- and control.

Under the proposal, the city, which owns the theaters now, would enter into a 30-year lease with a local nonprofit called the Hennepin Theatre Trust. HTT today exists mostly on paper, but under the deal would expand its board from 16 to more than 20, and build a $10 million endowment. At the end of the 30 years, HTT would assume ownership of the theaters.

In my world, I look at Clear Channel as a means to an end. They are a vehicle to finance this large, ultimate transfer and get it off of the city's books.

- Tom Hoch, president of the Hennepin Theatre Trust

Minneapolis's director of community planning and economic development, Lee Sheehy, presented the deal to the council.

"There is no provision in here, and in fact there are restrictions in here, that these venues would never be sold to any for-profit entity, including Clear Channel. I know there was some misunderstanding early on about that. Let me be clear about that issue," said Sheehy.

But there is no question Clear Channel is the major player in the deal. The radio giant is also a world leader in traveling Broadway shows and other live entertainment, and the arrangement guarantees long-term access to the third-biggest theater market in the country.

Clear Channel would guarantee more than $22 million of debt on the theaters, providing the financial muscle that allows the deal to happen.

In practice, the nonprofit would contract management of the theaters to a for-profit called the Historic Theatre Group. The group was founded by two local businessmen with a history of involvement in Hennepin Avenue. Minnesota Public Radio earlier reported at least one of the two has been in talks to sell a larger share to Clear Channel.

Council Member Paul Zerby, a skeptic of the deal, questioned city staffer Sheehy about ownership of the for-profit.

"It's my understanding from our conversation the other day that the Historic Theater Group, the local for-profit -- Clear Channel already owns a majority of that, do they not?" Zerby asked.

"It's always been the staff's understanding from the proposal that at the inception of the lease, Clear Channel will have a controlling interest in the for-profit," Sheehy responded.

When Zerby followed up by asking whether Clear Channel has a controlling interest now, Sheehy responded.

"My understanding is that the parties are moving in that direction," he said.

The agreement also allows the management company to let a Clear Channel subsidiary take over some or all of its duties.

These terms have led Zerby and some colleagues to wonder what kind of authority will really reside with the still skeletal nonprofit, that will be nominally in control.

The nonprofit's president, Tom Hoch, said his group will grow to meet its new mandate, and operate the theaters in the community interest.

"There's been a lot of discussion about Clear Channel, and while they are a major player in this I want you to know that the lease runs to Hennepin Theatre Trust," Hoch told the council committees. "In my world, I look at Clear Channel as a means to an end. They are a vehicle to finance this large, ultimate transfer and get it off of the city's books. That's what we've been talking about, that's the role that Clear Channel is going to play."

Hoch says the theaters will be booked with an "open calendar," and Clear Channel will not have favored access to the theater stages. HTT will spend at least $1 million a year on education and community programs, doubling its current commitment.

One council member pointed out the $1 million is not indexed to inflation, meaning the commitment will shrink over time. The agreement also commits the management to hosting just four community productions in the theaters per year, out of a goal of 400 total performances.

The two council committees that considered the theaters deal gave it a mixed endorsement. The Community Development Committee approved it; the Ways and Means Committee, though, voted to move it to the full council without a recommendation.

Still, the deal appears for now as if it will have adequate support when it comes before the council for a final vote on April 15.